Silverpeak Q4 2022 Benchmark report: Further stabilisation and the first signs of growth

Welcome to the latest edition of the Silverpeak Benchmark report – a review of public Application Software company valuation metrics in Europe, UK and the US, broken down by SaaS, Vertical and Horizontal. By reviewing median values, our aim is to provide a robust industry reference benchmark.

Report highlights

  • In Q4, software stocks were more resistant to macroeconomic factors than expected, as can be seen by the stabilisation in our dataset. During this past quarter, we saw ongoing geopolitical instability, rising energy prices and supply chain disruptions from Q3 as a result of the continued Russia-Ukraine conflict.
  • Our data shows that EV/Revenue multiples not only stabilised in Q4 but showed significant growth in certain categories and sectors such as UK companies (+12%) and security companies (+17%). After decreasing by 22% QoQ on average over Q1 and Q2, the software markets have steadily normalised and returned to levels similar to pre-2020 levels.
  • Market sentiment continues to place higher importance on profitability as opposed to forecast revenue growth, which can be seen by the 7% average increase in EV/EBITDA multiples over Q4.

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Q3 2022 | Series B&C rounds – the state of the market for European tech companies

Welcome to the latest edition of the Silverpeak B&C Rounds report – a review of Series B&C investment rounds into European technology companies. The dataset covers total capital invested, average deal sizes, frequent investors, investments by country, among other statistics. The aim of this report is to provide readers with a good understanding of the fundraising environment for technology companies in Europe.

Report highlights

  • Series B&C deal activity exhibited a substantial slowdown QoQ , with total deal value falling to 2.27bn, 66%, the same as Q3 2019 which was, however, a record at the time. Deal count reduced to 59, 41%.

 

  • In Q3 only one fund led 2 or more Series B or C rounds ECBF leading 2 Series B rounds. In Q1 and Q2 17 funds led 2 or more series B and 6 led 2 or more Series C.

 

  • Overall, median deal sizes are getting smaller.  Series B and C experienced a QoQ decrease of 27% and 41%, respectively to €23m and €44m median value.

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Paddy MccGwire presents overview of Series B&C growth funding market for European tech companies

Paddy MccGwire, Silverpeak Managing Partner, spoke at the inaugural ScaleUp Conference this week.

The event provided technology entrepreneurs with insights into the current state of the growth funding landscape and the technology sector at large. with a panel of expert speakers from the Scaleup Group, Silverpeak and TechMarketView followed by entrepreneurs, from both private and public companies, sharing their scaleup journeys.

Paddy’s keynote provided an overview of the Series B&C growth funding market for European tech companies highlighting:

  • The funding environment in the two years to Q2 2022 has been an extraordinary trend aberration
  • Investment in Q3 2022 fell 65% from Q2, to the same as Q3 2019, which was a record level of investment
  • The UK had the biggest reduction in number of investments, but still leads Europe by number and value
  • Series C megadeals of €100m+ fell from 42% to 7% in Q3

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If you would like to discuss this report please get in touch with Paddy MccGwire, pm@silverpeakib.com

 

European deeptech – the next wave

Acquirers and investors have been circling Europe’s vibrant deeptech sector for several years now. Yet as the economic picture clouds, how is this affecting appetite for dealmaking in this area?

Software and SaaS deals may have dominated the headlines for a decade or so, but over the past three to four years, another corner of the technology space – deeptech – has been garnering increasing amounts of attention from strategic acquirers and financial investors. Silverpeak analysis shows, for example, that venture capital (VC) funds have raised an estimated €4bn of capital for investment in European deeptech since 2021.

Encompassing areas such as fundamental artificial intelligence, semiconductors, spacetech, medtech, IoT and additive manufacturing, deeptech aims to solve complex scientific and engineering problems. Companies in the sector benefit from defensible IP and their value creation potential for shareholders is significant, but their growth path and time to market is longer than for many other types of technology business, such as those in software or e-commerce. The complexity of the technologies and the problems they address naturally means that R&D time horizons are more extensive and incubation is more capital-intensive. These companies also therefore need investors and advisors with specialist knowledge.

For those with the expertise and patience required to exploit deeptech’s potential, companies in the sector offer attractive investment and acquisition opportunities. As a result, we continue to see strong European deeptech deal volumes, even as the economic outlook has become more challenging.

Strategic interest

Our analysis shows that, while large deals are notably absent in 2022, European deeptech M&A activity in the sub-$1bn deal value range this year has remained largely consistent with historical levels. The third quarter saw deals in this bracket worth an aggregate $1.89bn, which suggests a run rate for H2 of $3.65bn. This is on a par with the value recorded in H2 2021 ($3.64bn), which was a time of exceptionally strong dealmaking in the technology sector more generally.

This demonstrates that there is clear appetite among strategic acquirers for European deeptech companies at the middle and lower end of the deal size spectrum. Buyers may consider these smaller deals as less risky, given the risk of recession. They may also see segments of the deeptech sector as an answer to some of the issues businesses face today – automation and robotics could relieve pressures stemming from labour shortages and rising wages, for example. Further, for US buyers in particular, European deeptech targets offer access to skilled workers that tend to have higher retention rates and lower average salaries than their peers in the US.

Enter the venture funds

However, VC investment is where we see the biggest shift in the deeptech deals market today. There is now a deep pool of investors targeting this space in Europe – our analysis shows that 236 investors participated in deeptech A, B and C rounds in the first nine months of 2022, with nine of these participating in at least three rounds in the sector.

Our data suggests that these investors have altered their investment approach against the backdrop of a challenging economic environment in many markets. In 2021 – a more bullish period than the one we are experiencing today – Series C rounds in European deeptech companies totalled $1.47bn, with a median deal size of $44m. However, for the first nine months of 2022, Series C activity slowed to just €369m, with median deal size falling to $20m.

VC investors are instead doubling down on earlier-stage opportunities. The year so far has been particularly strong for Series A rounds in European deeptech companies: at $795m, the first six months of 2022 saw the highest value – by some margin – of half-yearly Series A rounds to date, and H2 looks set to be equally robust, with $360m in Q3 alone. This compares with a full-year total of $538m in 2019 and $970m in 2021. Further, the median A-round deal size has risen substantially this year: in 2019 and 2020, this was $9m and in 2021, $11m; yet the median for the first nine months of 2022 stood at $14m.

So why are we seeing this pattern emerge among VC investments? One potential explanation is that larger companies are cutting costs at a time of more difficult economic conditions in a bid to preserve the capital they have raised to date. This will naturally reduce the size of the rounds they are looking to raise. At the same time, VCs are more cautious about investing large sums in more mature companies for the simple rationale that the path to exit may be more challenging in the near-term.

Yet on a more upbeat note, the other reason for more early-stage rounds is that VCs are playing a longer game: they are financing and supporting a bedrock of emerging deeptech companies that will continue to develop through a likely recession. Under this scenario, these businesses would reasonably be expected to start generating revenues as the economic cycle turns to a more positive outlook.

Deeptech innovations fostered today will bring about a new period of profound technological transformation in a variety of fields that could, among other things, accelerate medical breakthroughs, help stem climate change or solve supply chain problems in a de-globalising world. Our analysis demonstrates that there is a strong appetite among VC firms for investment in these early-stage opportunities today and that this will help to build the foundations for future transformation.


Silverpeak is a mid-market technology specialist representing European growth businesses in M&A and financing transactions. Our experience of working with European deeptech businesses includes investment rounds and acquisitions by leading international strategic buyers, institutional investors and VC firms. Our eight most recent deeptech deals had an aggregate enterprise value north of $700m and a cumulative transaction value of over $300m.

If you would like further information, please contact us: Pietro Strada, Managing Partner ps@silverpeakib.com

 

 

 

 

 

Silverpeak Q3 2022 benchmark report: Declining valuations – have we hit the bottom?

Welcome to the latest edition of the Silverpeak B&C Rounds report – a review of Series B&C investment rounds into European technology companies. The dataset covers total capital invested, average deal sizes, frequent investors, investments by country, among other statistics. The aim of this report is to provide readers with a good understanding of the fundraising environment for technology companies in Europe.

Report highlights

  • Q3 has seen inflation reach record highs, driven by various macroeconomic trends, including continued geopolitical instability, rising energy prices, and supply chain disruptions.
  • EV/revenue multiples are beginning to stabilise across the board. We can see the rate of decline this quarter (-9%) is much lower than in Q1 (-23%) and Q2 (-21%) of this year.
  • In 2022, the IPO market for software companies was particularly barren, only witnessing 9 IPOs, which, compared to a record 107 IPOs in 2021, is extremely low.
  • There are even more postive signs in the US where SaaS is starting to see a return to growth.

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Q2 2022 | The state of the market for series B&C rounds in European tech companies

Welcome to the latest edition of the Silverpeak B&C Rounds report – a review of Series B&C investment rounds into European technology companies. The dataset covers total capital invested, average deal sizes, frequent investors, investments by country, among other statistics. The aim of this report is to provide readers with a good understanding of the fundraising environment for technology companies in Europe.

Report highlights

  • €13.4bn was invested in European Tech Series B&C rounds in H1 2022, remaining on par with 2021 highs despite the current global recession
  • Total Series B investment continued to increase for the 7th consecutive half year, while Series C has continued to decline since peaking in H1 2021
  • The UK continues to attract the most Series B&C investment of any country in Europe. The €4.8bn invested in the UK surpasses the next two countries combined: Germany (€2.7bn) and France (€1.7bn)

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Silverpeak Q2 2022 benchmark report: Application Software multiples continue decline in Q2

Welcome to the latest edition of the Silverpeak Benchmark report – Application Software Sector, a review of key company valuation metrics in the US, UK and European application software sectors. By reviewing sector median averages, our aim is to provide a set of software industry benchmarks against which individual company performance can be measured.

Report highlights

  • Software valuations continued their slide in the second quarter amid concerns over recessionary indicators; accentuated by the large proportion of Growth Companies, who tend to suffer more from market volatility.
  • EV/revenue multiples have continued to decline across the board, averaging -21%.
    US (average -27%) and Europe (-19%) categories have been the most affected by the current economic situation. While the UK only decreased -5%, it continues to have the lowest median multiple.
  • In something of a bright spot, EV/EBITDA multiples in the UK remain higher (+20%) than the 12 month period pre-COVID pandemic and in Europe the multiples are only 3% lower then pre-pandemic.
  • Investors placed more importance on profitability than forecast revenue growth in Q2 2022 as EV/revenue multiples across categories and sectors saw a heavier correction than EV/EBITDA multiples.

 

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Silverpeak Q1 2022 benchmark report: Multiples fall 16% across all categories

Welcome to the latest edition of the Silverpeak Benchmark report – Application Software Sector, a review of key company valuation metrics in the US, UK and European application software sectors. By reviewing sector median averages, our aim is to provide a set of software industry benchmarks against which individual company performance can be measured.

Report highlights

  • On average, EV/Revenue and EV/EBITDA multiples fell 16% across all categories. Europe and UK were impacted more severely, with an average 22% decrease compared to an average 11% decrease between the US categories.
  • This widespread decline can be attributed to the uncertainty brought about by factors including: the ongoing pandemic, particularly the impact of city-wide lockdowns in China; geopolitical tensions, notably the war between Russia and Ukraine; and significant inflation that was already rising due to supply chain and recruitment issues across developed economies.
  • Unsurprisingly, the market is valuing profitability over growth at this time: EV/Revenue multiples have decreased significantly more than EV/EBITDA multiples, both quarter-on-quarter and year-on-year.
  • The DeepTech and Industrial sectors are the most volatile of all the sectors covered in the report. On the one hand, they showed the largest (positive) year-on-year EV/Revenue growth, but on the other hand, they also experienced the biggest declines in quarter-on-quarter EV/EBITDA index.


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The State of the Market for Series B&C Rounds in European Tech Companies | 2021

Silverpeak has updated its research into Series B & C round in European Tech Companies.

Key takeaways:

  • Series B&C investment in European tech companies rockets with total capital invested in 2021 increasing 2.5x to €25.3bn
  • European mega-rounds (€100m+) are becoming very common. Of the 2021 total of 58, this was 42 Series C and 16 Series B rounds
  • Median deal sizes have nearly doubled YoY: C rounds grew 89% to €78.4m and B rounds grew 68% to €29.9m
  • UK companies continue to attract the biggest share of investment into European B&C rounds – 32% by value and 35% by count
  • Food & Delivery Tech and Fintech captured the largest investments in 2021, with 3 Series C and 2 Series B rounds, totalling €3.1bn

Paddy MccGwire, Managing Partner, commented that “2021 has been a watershed year with a step change in the value of Series B&C Technology sector investment. The pace and scale of private investment continues into 2022 despite reduction in Technology stock indices on public markets. ”

B&C Rounds Research Silverpeak

Q4 underpins 2021 as the year of European software, outperforming all other categories

Welcome to the latest edition of the Silverpeak Benchmark report – Application Software Sector, a review of key company valuation metrics in the US, UK and European application software sectors. By reviewing sector median averages, our aim is to provide a set of software industry benchmarks against which individual company performance can be measured.

Report highlights

  • Despite a year-end correction, European software multiples outperformed their US peers, growing at an impressive 47% YoY for Europe and 26.2% for UK Small & Mid.
  • After a volatile Q4, the last quarter ended in only a small overall movement in revenue multiples across all categories, with the exception of UK Small & Mid which decreased 7.9% QoQ.
  • There is no distinctive trend on EBITDA margins in Q4 – a small increase for both Europe and US Horizontal, and decreases for UK Small & Mid, US SaaS and US Vertical.
  • The Enterprise Values Index increased modestly across 3 out of the 5 subsectors, led by Cybersecurity, and then HR tech and Industrial. Fintech charted the strongest decline this quarter, ending the year with a small plus of 3%. Every index declined in December.

Silverpeak Benchmark Report Q4_2021